Mining News

Environmental Regulations and Mining Investment in Canada

The recently released federal Budget 2012 contained changes to how resource and mining projects would be approved. According to the budget announcement by Jim Flaherty “we will streamline the review process for such projects, according to the following principle: one project, one review, completed in a clearly defined time period”[1]. Some of the reasons cited for the change in Chapter 3.2 of the budget include the complication of existing rules and bureaucracy, the extended length of time for environmental reviews, and duplication and needless waste of time and resources “adding costs and delays that can deter investors and undermine the economic viability of major projects”[2].

Changes to review process

The new federal legislation will reduce the duplication of environmental reviews viewed by industry as unnecessarily slowing and impeding mining projects.[3] Before this change, certain projects could be subject to both federal and provincial environmental assessments processes with overlapping regulatory requirements and processes. In recent years, some provinces and territories have entered into agreements with the Federal government to reduce this duplication and to harmonize the process.

Under the new review system, provincial processes will be recognized as equivalent to federal ones if they comply with the Canadian Environmental Assessment Act. [3] The new system will also set predictable timelines for hearings and assessments, reduce the number of organizations that can do a review, focus federal assessment efforts on major projects, and introduce enforceable environmental assessment decision statements. [3]

Fraser Institute Survey of Mining Companies

Mining investment is globally mobile, with mining companies choosing where they will invest based on geological, socio-economic, and political factors. The Fraser Institute’s Survey of Mining Companies is conducted annually to survey mining and exploration companies on how public policy factors affect their investment decisions. Companies are asked to rate jurisdictions on various factors including uncertainty concerning environmental regulations and regulatory duplication and inconsistencies. Respondents use a scale of 1 (encourages investment) to 5 (would not pursue exploration investment in this region due to this factor). By looking at this data, we can get an idea of which Canadian jurisdictions may benefit most from the proposed changes in the federal budget.

Uncertainty concerning environmental regulations

While the Fraser Institute’s mining survey asks about uncertainty concerning environmental regulations, this should not be interpreted as a reflection of the toughness or stringency of regulations. Mining companies expect to follow environmental regulations and are more deterred by uncertainty in their application than stringency. In fact, environmentally stringent jurisdictions do not fare worse and jurisdictions such as Sweden and Finland, with relatively stringent environmental regulations [4, 5], both had no responses in 2011/2012 stating that investment would not be pursued due to this factor. [6]

In Canada, the 2011/2012 survey results showed that uncertainty concerning environmental regulations was highest in the Northwest Territories, with 28% responding that this factor is a ‘strong deterrent’ or ‘they would not pursue investment due to this factor’. [6] This was followed closely by British Columbia where 27% of respondents were strongly deterred or would not pursue investment. [6] Other provinces and territories had less than 11% of respondents deterred by uncertainty concerning environmental regulations. [6] Some historical trends include: [6-10]

British Columbia’s environmental uncertainty declined in 2011/2012. Over the last five years it had increased from 15% of respondents discouraged from investing due to environmental regulatory uncertainty in 2007/2008, to 38% in 2010/2011, before dropping to 27% in 2011/2012.

The Northwest Territories have also decreased from a high of 41% of respondents stating that they were strongly deterred or would not invest due to environmental regulatory uncertainty in 2010/2011, to 28% in 2011/2012.

Quebec, New Brunswick, and Saskatchewan have consistently had low uncertainty in this area.

The Canadian average for uncertainty concerning environmental regulations as a discouragement to investment has declined slightly from 11% in 2008/2009 to 10% in 2011/2012.

Regulatory duplication and inconsistencies

High regulatory duplication and inconsistencies also strongly deterred or caused investors not to invest in the Norwest Territories (26%), British Columbia (24%), and Nunavut (18%) according to the 2011/2012 survey. Again, British Columbia decreased the number of investors not pursuing or discouraged from investing due to regulatory duplication in 2011/2012. This reversed a trend from 2007/2008 to 2010/2011 that saw increases in respondents discouraged from investing due to regulatory duplication. [6-10] The Northwest Territories and Nunavut also decreased from 45% and 33% respectively of respondents discouraged from investing due to regulatory duplication in 2010/2011. The long-term average for Canadian jurisdictions has fluctuated but declined from 13% of investors discouraged by regulatory duplication in 2010/2011 to 11% in 2011/2012. [6-10]